Putin’s Asset Grab: A Pattern of Protectionism in Russia

The latest decree signed by Vladimir Putin seizing assets from Swiss food giant Nestle and three French firms is the latest manifestation of a long-standing protectionist agenda in Russia. While many Western companies have exited or isolated their operations following the invasion of Ukraine, Moscow has made it increasingly difficult for them to leave.

This move marks another escalation in Putin’s efforts to consolidate control over Russia’s economy and punish those who refuse to comply with his vision. The assets seized include Russian operations from Nestle, French retailer Auchan, and the former Leroy Merlin DIY chain, now known as Lemana Pro. FM Logistic, a French logistics group, also has its Russian subsidiaries under Putin’s decree.

LEV Management, the company tasked with managing these assets, was created just last year. Headed by a Russian interior ministry general, it had no known business activity prior to this assignment. This lack of transparency is consistent with Russia’s opaque and often erratic economic policies.

The West has imposed sanctions on Russia in response to its actions in Ukraine, but Putin seems determined to retaliate against Western businesses operating within his borders. By making it difficult for firms to leave or operate in isolation, he aims to limit their ability to circumvent sanctions and maintain business continuity.

Nestle’s statement that they are “committed to taking all necessary steps” to protect their interests suggests a commitment to complying with Western sanctions is not absolute. The company continues to supply essential food items to Russia, albeit at a reduced scale. As Jean-Philippe Bertschy from Vontobel noted, Russia now accounts for just over one percent of Nestle’s sales, making the financial impact relatively small.

This situation is not unique in Russia. The takeover of Danone’s Russian business by a nephew of Chechen leader Ramzan Kadyrov in 2023 serves as a precedent. This move was part of a larger trend where Western companies are either forced to exit or have their assets seized and transferred to local entities with ties to the Kremlin.

The implications of this pattern are far-reaching. As Russia continues to consolidate its control over its economy, it becomes increasingly difficult for foreign businesses to operate in good faith. The protectionist agenda of Putin’s regime undermines the principles of free market economies, which rely on fair competition and equal access to resources.

Western companies must weigh their options carefully as they navigate this complex landscape. Continuing to supply essential goods may seem pragmatic but perpetuates a system where Russia dictates business operations. Ultimately, the West must recognize that Putin’s asset grab is not just about punishment or protectionism; it’s about establishing a new order in Russia – one fundamentally incompatible with Western values.

As long as Putin remains committed to his protectionist agenda, the business landscape in Russia will remain a minefield for foreign companies.